Special Feature: CLE Article #20*
By Candace Carlyon
There’s a story about a lawyer whose case was transferred to bankruptcy court. The lawyer filed a “Motion to Send It Back.” The judge asked, “Have you read the Bankruptcy Code, the Bankruptcy Rules, or the Local Rules?” The lawyer said, “No, Your Honor.” The judge replied, “And you expect to practice before me?” The lawyer answered, “No, Your Honor—that’s why I want you to send it back.”
Here’s a sample of what you need to know about the different world of bankruptcy.
1. How to get your case out of bankruptcy court
Bankruptcy courts hear two types of disputes:
- Adversary proceedings—lawsuits within the bankruptcy case.
- Contested matters—opposed motions.
If your case was removed from state or federal court, you have 30 days to file a motion to remand. 28 U.S.C. §1447(c). Remand may be granted where the bankruptcy court lacks jurisdiction, or on “any equitable ground.”
Other paths out of bankruptcy court include:
- Relief from stay—a court allows a lawsuit to continue in another court.
- Abstention—bankruptcy court steps aside for state-law issues.
- Withdrawal of the reference—district court takes the matter back.
- Arbitration/mediation—generally allowed only if the issue isn’t central to the bankruptcy.
Courts use the Curtis factors in In re Curtis, 40 B.R. 795, 799-800 (Bankr. D. Utah 1984), to decide whether to lift the stay—essentially comparing who is harmed more and whether another court can resolve the dispute more efficiently (especially when insurance is defending).
Bankruptcy courts cannot enter final judgments on non-core claims, hear personal injury claims, or conduct jury trials without the consent of all parties.
The Local Rules of Bankruptcy Procedure require a party to state its consent or non-consent to the entry of final orders by the bankruptcy court in the first pleading filed in an adversary case or contested matter (i.e. motion proceeding) in bankruptcy court.
2. You must register for ECF
To file anything in bankruptcy court, you need ECF training and registration through nvb.uscourts.gov. Limited users can file only proofs of claim or requests for notice. Paper filing is cumbersome compared to becoming an ECF user.
3. You can’t “bankruptcy-proof” a settlement—but you can protect yourself
If you’re settling with someone who might file bankruptcy:
Acknowledge the full debt.
Any reduction in payment should take effect only if all payments are made on time.
Example:
- Original debt: $1,000,000
- Settled amount: $100,000
- If the debtor files bankruptcy before making payments, and creditors get 10 percent, you’ll recover:
- $10,000 if the debt is already reduced to $100,000
- $100,000 if the balance remains $1,000,000 until paid in full
Delay the release by 91 days.
Payments received within 90 days of the bankruptcy filing may in some cases be clawed back as a preference.
Get factual admissions for fraud-based claims.
If the debt is based on fraud, embezzlement, willful injury, or DUI-related injury, include factual findings to support nondischargeability.
4. Judgments should include facts supporting nondischargeability
If the debt involves conduct listed in 11 USC § 523, the judgment should contain specific findings showing the statutory elements. Note that there is a strict deadline to object to discharge of a debt—within 60 days of the first date set for the 341 meeting—whether or not the meeting occurs or is concluded. See Fed.R.Bankr.P. 4007(c).
5. Bankruptcy discovery is easy and broad
Bankruptcy is designed to be transparent. There are a number of sources of information available to creditors.
- The debtor is required to file schedules and statements listing a large amount of financial information. See Fed.R.Bankr.P. 1007.
- Each debtor must appear at a meeting of creditors as required by 11 USC § 341 (often called the “341 meeting”). Any creditor or party in interest can attend (currently via video or telephone) and ask questions—a creditor need not be represented by counsel to do so. 11 USC §341(c).
- A Bankruptcy Rule 2004 examination can be requested ex parte, including a document subpoena, and is approved by the Clerk of the Court so long as at least 14 days’ notice is provided. The scope of a 341 meeting or 2004 examination includes debtor’s acts, conduct, assets, liabilities, financial condition, right to discharge, operations, and source of funding a plan.
- A Chapter 11 debtor must file monthly operating reports. See LR 2015.4(a) and U.S. Trustee operating Guidelines And Reporting Requirements For Debtors In Possession And Trustees, Section 7.
6. Personal injury claims must be disclosed—and often belong to the trustee
All assets, including unfiled or potential personal injury claims, and all liabilities must be listed. In Chapter 7, non-exempt PI claims belong to the trustee, who prosecutes and settles them. See 11 USC §541. There is no such thing as handling an asset or a debt “outside the bankruptcy.”
7. But some personal injury recoveries may be exempt
Debtors must list all exemptions. Common Nevada exemptions for PI claims include:
- $16,150 for personal bodily injury (not pain and suffering) under NRS 21.090(1)(u).
- A percentage of lost wages under NRS 21.090(1)(g).
- $10,000 wildcard under NRS 21.090(1)(z).
Objections to exemptions must be filed within 30 days after the 341 meeting concludes (or 30 days after amendments). See Fed.R.Bankr.P. 4003(b)(1).
8. PI attorneys must be employed by the trustee
If the PI claim is estate property, the trustee must hire the PI attorney. Both employment and compensation require court approval (11 USC §§237-331), and all settlements require approval under Bankruptcy Rule 9019.
9. The automatic stay is—automatic
The moment a bankruptcy is filed, pursuant to 11 USC §362(a), almost all actions against the debtor or estate must stop:
- Lawsuits
- Judgments
- Collections
- Repossessions
- Foreclosures
Violations are void (Schwartz v. United States (In re Schwartz), 954 F.2d 569 (9th Cir. 1992)), and willful violations can bring damages, attorney’s fees, and sometimes punitive damages. See Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 1190-91 (9th Cir. 2003).
Note:
- The stay does not automatically protect co-defendants or guarantors.
- Knowledge of the bankruptcy can come from any source.
- UCC renewals are allowed despite the stay—failure to renew means loss of priority.
10. Special rule to perfect mechanics’ liens
Normally, you must sue within 6 months to enforce a Nevada mechanics’ lien (NRS 108.223). If there is a bankruptcy before the suit is filed, you must file a notice of perfection under Bankruptcy Code §546(b)(2) in the bankruptcy before the 6-month deadline to preserve lien rights without violating the stay.
About the author
Candace Carlyon has practiced in bankruptcy, financial restructuring and commercial litigation since 1986. She and her partner, Dawn Cica, formed Carlyon Cica Chtd. in 2019. She is a past president of the American Board of Certification of Bankruptcy and Creditors’ Rights Attorneys.
About the article
About: The CCBA’s Article #20: “10 Things Non-Bankruptcy Lawyers Should Know About Bankruptcy” offers 1.0 Credit of Continuing Legal Education (CLE) to Nevada lawyers who complete the test and order form per the offer described in the Communiqué (Feb. 2026, pp. 26-30). See Communiqué (Feb. 2026) PDF file to download. The CCBA is an Accredited Provider with the NV CLE Board.
This article was originally published in the Communiqué (Feb. 2026), the official publication of the Clark County Bar Association.
The Communiqué (Feb. 2026) focuses on bankruptcy law with short articles on interesting topics written by bar members for bar members. Also featured is a variety of content from the printed publication’s recurring columns and highlights on bar activities. Select content is available to read online now. See = https://clarkcountybar.org/about/member-benefits/communique-2026/communique-feb-2026/.
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